Mass Walmart Abandonment Creates Post-pandemic Opportunity

​With the closure of many primely located Walmart stores over the years and coupled with the COVID-19 pandemic, a St. Louis, Missouri firm seeks to increase commerce revenues by creating new town squares in various metro markets.

Quoting Steph Kukuljan of the St. Louis Post Dispatch, “As retail reeled during the coronavirus pandemic, a group of local investors kept buying shopping centers.

MRP Capital Group, a Clayton private equity real estate firm, buys Walmart “shadow” centers — shopping strips located near the giant discount retailer — in small towns overlooked by other real estate investors. And despite the pandemic walloping traditional brick-and-mortar retail, the firm is booming. It raised $105 million to buy 42 properties over the past year and aims to keep buying. It’s an example of a retail model that’s working, even as shoppers go online and the pandemic continues to hit storefronts.

“It’s kind of the new Main Street where Walmart is the center of these communities. It’s where everybody goes grocery shopping and makes other purchases,” said managing partner Jordan Breck. “Everything that they can’t do at a Walmart, they can do with our centers.”

Many brick-and-mortar retailers struggled during the pandemic. Foot traffic died. Some stores had to close for a while. Rent still came due. Shoppers, meanwhile, headed online to make purchases.

But where some retailers faltered, others thrived. The DIY crowd flocked to hardware and home improvement stores. Automotive businesses like car washes and repair shops have even been looking to expand. And the pandemic delivered a “sales windfall” to the grocery industry, said Mike Swearngin, senior vice president of commercial real estate firm Pace Properties.

That left Walmart, already a grocery store juggernaut, breaking sales records during the pandemic. Revenue grew $35 billion to $559 billion last fiscal year and has continued to rise: In August, the company reported a $3.3 billion, or 2.4% increase in revenue, to $141 billion.

A high-performing Walmart can draw 150,000 to 200,000 visits per month, a boon for nearby businesses. Shadow centers are typically made up of service-oriented retailers such as restaurants, financial services, hair salons, cellphone stores and dentists — which usually can’t be done online.

“The visibility and foot traffic that adds to a shadow-anchored retail strip center with millions of customers parking next door is irreplaceable to tenants,” said Colliers commercial real estate vice president Alex Perez, who has worked with MRP before.

MRP Capital began buying Walmart shadow centers in 2015. It now employs 25 people and owns more than 60 centers in small towns across the U.S. — including four in the St. Louis region — with tenants such as Dollar Tree, Great Clips and Verizon Wireless. In July, it closed on the $105 million fund, its first-ever, that it used to buy the centers across 23 states.

“If you can go out and execute on $100 million funds in the heart of COVID, nobody can argue that MRP knows what they’re doing,” said Joe McClary, a managing partner at MRP.

The company hasn’t been entirely immune to the pandemic. MRP deferred or abated rent for about 35% of its tenants, Breck said, which it offset with some mortgage deferment by its lenders.

Still, since the pandemic’s start, MRP lost just two tenants, a national women’s clothing chain and a vitamin shop.

“99.9% of our retailers have thrived through COVID,” McClary said. “Service-oriented retail is not going away.”

McClary and Breck said they will be targeting more acquisitions in the southern half of the country while doubling-down on existing markets.

“We want to continue to scale,” Breck said. “We’re just getting started with Walmart shadows.”